[bhivar]

Got It!

Thanks

[bhivar]

Prof,

I understand your solution but still would like to know two things:

1. Why is the 20,000 used to purchase the car not regarded as cash drawings?
(Cash used from the business bank account for personal use). If so then the cash drawings could be 108,000.

2. How do we know the closing Net business assets includes the 20,000 for the car purchase?
After all the statement says “Business cash used to buy a car for the proprietor’s wife who takes no part in the business” and could mean that business cash was used but was treated in the SOFP as drawings hence the closing net assets will be net of that.

Hope I am making some sort of sense there…

[bhivar]

Thank You. Will do.

[Author]

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